CALIFORNIA: Broke and Broken

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There is good news and bad news in California. The good news is state tax revenues grew $6 billion more than expected in the latest report reducing the state budget deficit from $16 billion to $10 billion for the year with less than a month to go before the Constitutional deadline for approving a budget.

The bad news is there is no legislative agreement on the budget and little prospect of getting one by the deadline. The Legislature rarely meets its deadline for budget approval.

Governor Brown proposed to close the deficit with extensions of sales and incomes tax rate increases scheduled to expire to cover half the shortfall and budget cuts to close the rest. Democrats scream soak the rich, Republicans scream stop spending money you no longer have.

So while Sacramento dithers, out here in the real world stuff happens:

A Pox on Both Your Houses. California voters in the last election approved a ballot initiative to reduce the legislative votes needed to approve a budget from 2/3 of each House to a simple majority. But Californians are not stupid so they also approved another measure that requires a 2/3 vote of the people to raise taxes so Governor Brown can propose tax increases and the Legislature can put them on the ballot but the people will decide.

California bad-mouthed as not being business friendly. Newly elected Lt Governor Gavin Newsom, former mayor of San Francisco, lead a delegation to Austin Texas to investigate why so many California businesses were moving out of the Golden State and end up on the Lone Star State. In one meeting covered by the media, executives of companies that quit California complained of burdensome regulation, high costs of mandates, and deteriorating business conditions. One fast food chain executive said it takes more than 2 years to get permits to build one of his restaurants in California compared to 6 weeks on average in Texas—so his company is building 200 more restaurants in Texas and only 4 more in California and those are relocation of existing establishments to better locations.

BayWatch Salaries. Newport Beach’s 13-member full-time lifeguard crew salaries, benefits and overtime pay average over $100,000 each and the top two cost more than $200,000 each(with $400 for sun protection) as the city struggles to rein in pension costs.

Vacation Scams. Despite a policy limiting vacation carryover from year to year to 80 days (640 hours) total accrual, the State of California was forced to pay $2.75 billion for more than 75.5 million hours of excess vacation accrual because its managers failed to enforce its policy. One prison doctor accumulated more than two and one-half years worth of vacation and was paid $594, 976 upon retirement. An audit report says 29% of state employees leaving the system were paid for excess vacation time and 400 received an amount equal to more than one year of salary.

We Pay them HOW MUCH!#@? The San Jose Mercury Newspapers have posted an online database of public official salaries creating a controversy over intrusions into employee privacy not that pales next to the controversy the facts revealed. Public officials are well paid in California—very well paid. Some part-time elected city council members are paying themselves nearly $100,000 per year while others get $100 per meeting for their service. Some cities, counties and special districts pay the health insurance costs and pension contributions for part-time elected officials. In some instances the annual cost of benefits is a multiple of the salaries paid.

Wined, Dined and Termed Out. California has more than 300 state boards and commissions many of which have turned into ‘way-stations’ for termed out legislators and others with political connections. In the most egregious cases, these board appointments are paid $125,000 per year or more to attend a monthly meeting lasting several hours. Governor Brown responded to the last newspaper expose by proposing to eliminate a handful of these boards which met with howls of resistance from legislative leaders and the appointed politicians.

So what?

California is careening down the freeway out of financial control with the radio blaring the song “ Do You Know the Way to San Jose” hoping desperately that Silicon Valley will take off again and refill the treasury with gold except Intel decided to build its two new chip making plants in Arizona and all those millionaires California needs changed their legal residence to Texas which has no income tax or capital gains tax.

California is broke and our state government is broken and even the Terminator failed us so we hired back Governor Moonbeam who is busy negotiating new labor agreements which do include some pay and benefit concessions from state employees but do little to change the fundamental flaws in the benefits structure that got us in trouble.